The PREP Plan: Paying for Reform and Extension Policies

In the coming months, Congress and the President will face a number of important decisions with significant fiscal implications. Specifically, they must decide how to address “Sustainable Growth Rate” (SGR) cuts, which threaten to significantly reduce Medicare physician payments next April, and 55 “tax extenders” that expired at the end of last year.

If policymakers address these two issues irresponsibly, they could add up to $1 trillion to the debt over the next decade. Yet policymakers could also use these moments to make a down payment toward tax and entitlement reforms that slow health care cost growth, speed economic growth, and help put the debt on a sustainable long-term path.

Fully offset the cost of any continued extenders without undermining tax reform

Include a fast-track process to achieve comprehensive tax reform

There are many ways to achieve these goals. The Paying for Reform and Extension Policies (PREP) Plan represents one such approach. We assume, but don’t endorse, the Tricommittee SGR bill and two years of tax extenders and propose $170 billion of SGR offsets that bend the health care cost curve, $83 billion of extender offsets that improve tax compliance, and a fast-track process for tax reform. Offsets would total $250 billion over ten years.

Summary of the PREP Plan (Costs/Savings over Ten Years)

Enact Tricommittee SGR Reform

$170 billion

Extend "Tax Extenders" to 2015

$83 billion

Reform Provider Incentives

-$80 billion

Improve Tax Enforcement

-$35 billion

Reform Beneficiary Incentives

-$80 billion

Close Tax Avoidance Loopholes

-$45 billion

Reduce Medicaid Costs

-$10 billion

Restrict Inversions

-$3 billion

Total Offsets

-$170 billion

Total Offsets

-$83 billion

Set Up Fast Track Process for Comprehensive Tax Reform

TBD

Ten-Year Deficit Impact : $0

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